Help...Should my girlfriend go bankrupt?

Malestrom

There are a lot of factors to consider here. Firstly, the car is an asset that she can not afford. She needs to buy a much cheaper (both in value and insurance cost) vehicle and sell the current one.

She needs to pay back what she owes to her family from the proceeds of the car sale.

Her parents need to agree to stop charging her rent.

She needs to reduce her general living expenses as far as possible. If she could cut it by £70pm then with not having to pay rent she could just survive. The leftovers from the sale of the car would then need to be paid into the most expensive debt.

So lets say she got £4000 for the car. She buys another one for £800, pays her family back £1200 (you say over a grand) and this leaves £2000 to play with. She throws that at, for example, the Monument card which when including her monthly payment would clear this card. Close the account. This now frees up an extra £62pm month to throw at the next most expensive debt, M&S CC. This would take about 18 months to clear at £145pm. That then gives you £145 to throw at the next most expensive debt and so on. This is called snowballing. There is an online calculator where you can enter all the debts, the APR's and it will tel you when you will be debt free using this method. You can find it here.

Now this is all well and good but it takes certain things for granted, such as generous parents who will let her off the rent for a long time, not just a couple of months. Currently, after paying her living expenses she actually only has £330pm to service her debts.

She could take out a DMP (Debt Management Plan) which equates to about 7.5 years at £330pm. She can take out an IVA, paying probably about the same per month but over 5 years. Or, she can go bankrupt, paying just under £500 to do so, and pay a similar amount for 12 months, unless she's considered to have been reckless in which case it might be longer. You may not be able to work out what she's done with all that money but the OR will sure as hell want to know.

She'll have an awful credit record no matter which course of action she takes, which is good, as it will make it more difficult (although not impossible) to get into this situation again. After seeing all the facts and figures, bankruptcy may be the most sensible option but the OR will sell that car and will only allow her to buy another, cheaper one from the proceeds of the sale if she can demonstrate that its vital for her to get to/from work. The rest of the proceeds from the car would go to her creditors. Her family debts would not be included in the bankruptcy and she would not be allowed to pay them off until she was discharged.

pug_in_a_bed

that snowballin glink is brilliant - many thanks! been wondering how peoepl calculated their debt free dates for ages! thanks!